Captaris Reports Revenue Increased 12.9%; EPS of $0.06 in the Third Quarter 2006
Bellevue, Wash., November 2, 2006 — Captaris, Inc. (NASDAQ: CAPA), a leading provider of software products that automate document-centric business processes, today reported financial results
for its third quarter ended September 30, 2006.
Total revenue for the third quarter was $24.6 million, a 12.9% increase over the prior year’s third quarter and an 8.5% increase
over the preceding quarter. Revenue by category compared to the third quarter of 2005 was as follows:
- Software revenue was $9.6 million, an increase of $1.3 million or 15.8%
- Hardware revenue was $5.5 million, an increase of $296,000 or 5.7%
- Maintenance, support and service revenue was $9.4 million, an increase of $1.2 million or 14.6%
Gross profit was $17.1 million, an increase of $2.0 million or 13.0%, compared to the same quarter last year, and gross margin
was 69.7%, an increase from 69.6% in the same quarter last year.
Total operating expenses were $15.1 million for the third quarter of 2006, a decrease of approximately $2.3 million, or 13.0%,
from total operating expenses of $17.4 million for the same quarter last year. The decline in operating expenses reflects
continued effective cost controls and actions initiated in the fourth quarter of 2005 to reduce the Company’s operating cost
structure.
“Our strong financial results reflect solid sales execution and the increased operating leverage we are achieving as our business
expands,” said David P. Anastasi, President and CEO of Captaris. “During the quarter, we achieved increases in all three revenue
categories. At the same time, we exceeded our cost saving objectives for the quarter with a 13% decline in operating expenses
year-over-year and continue to drive further improvement in operational efficiencies.”
The Company recognized stock-based compensation expense of $235,000 in the third quarter of 2006, compared to a benefit of
$59,000 in the third quarter of 2005. Amortization of intangible assets for the third quarter of 2006 was $835,000, including
$481,000 in cost of revenue and $354,000 in operating expenses, compared to $935,000 in the third quarter of 2005, including
$481,000 in cost of revenue and $454,000 in operating expenses.
Operating income in the third quarter of 2006 was $2.0 million, compared to an operating loss of $2.2 million in the third
quarter of 2005 and an operating loss of $252,000 in the preceding quarter.
Net income for the third quarter of 2006 was $1.6 million, or $0.06 per basic and diluted share, compared to a net loss of
$689,000, or $0.02 per share, in the same quarter last year and net income of $28,000, or break even per share, in the preceding
quarter.
On a year-to-date basis, total revenue of $66.8 million increased $5.0 million or 8%; operating expenses of $45.4 million
decreased $4.5 million or 9%; and net income of $1.7 million increased $5.8 million compared to the same period in 2005.
Cash flow from operations was $5.6 million in the third quarter of 2006, compared to $503,000 in the third quarter in 2005.
On a year-to-date basis, cash flow from operations was $12.0 million, an increase of $12.2 million compared to cash used of
$174,000 in 2005.
Consolidated cash, cash equivalents and investment balances as of September 30, 2006 totaled $56.9 million, an increase of
$488,000 from June 30, 2006. Deferred revenue at September 30, 2006 was $23.8 million, an increase of $374,000 over the preceding
quarter.
Stock Repurchase
During the quarter, the Company repurchased approximately 996,000 shares of its outstanding common stock at a cost of approximately
$5.4 million reflects an average purchase price of $5.39 per share. Captaris may repurchase shares under its stock repurchase
program subject to overall market conditions, stock prices and its cash position and requirements.
As previously announced on June 8, 2006, the Board of Directors authorized the Company to enter into a Rule 10b5-1 repurchase
plan to facilitate its stock buyback activity. The Rule 10b5-1 repurchase plan is designed to allow the Company to purchase
its shares at times when it ordinarily would not be in the market due to self-imposed trading blackout periods. Transactions
under the Rule 10b5-1 repurchase plan began, subject to the parameters of the plan, on September 18, 2006, the first trading
day after the open trading window closed in the third quarter. On September 30, 2006, the total number of outstanding common
shares was 27.2 million. As of October 26, 2006, $15.0 million is available for repurchases under the Company's repurchase
program.
Conference Call
The Company will discuss its third quarter results and business outlook for 2006 on its regularly scheduled conference call
today, November 2, 2006 at 1:45 pm PT/ 4:45 p.m. ET. The live web cast of the conference call can be accessed from the Investor
Relations section of the Captaris Web site at www.captaris.com or at www.mkr-group.com (under featured events). To access the live conference call, dial (800) 218-0530 and give the Company name “Captaris.” An
audio replay of the conference call can be accessed at (800) 405-2236. The replay will be available starting two hours after
the call and remain in effect until Thursday, November 9th at 11:59 PT. The required pass code is 11071426#.
About Captaris, Inc.
Captaris, Inc. is a leading provider of software products that automate business processes, manage documents electronically
and provide efficient information delivery. Our product suite of Captaris RightFax, Captaris Workflow and Captaris Alchemy
Document Management is distributed through a global network of leading technology partners. We have customers in financial
services, healthcare, government and many other industries, and our products are installed in all of the Fortune 100 and many
Global 2000 companies. Headquartered in Bellevue, Washington, Captaris was founded in 1982 and is publicly traded on the NASDAQ
National Market under the symbol CAPA. For more information please visit www.captaris.com.
Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995, including, without limitation, statements regarding our belief that we have positioned ourselves for improving
operating leverage in future quarters and our plan to repurchase shares under our stock repurchase plan. Forward-looking statements
include all passages containing verbs such as "aims," "anticipates," "estimates," "expects," "intends," "plans," "predicts,"
"projects" or "targets" or nouns corresponding to such verbs. Forward-looking statements also include any other passages that
are primarily relevant to expected future events or that can only be evaluated by events that will occur in the future. Forward-looking
statements are based on the opinions and estimates of the management at the time the statements are made and are subject to
certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking
statements. Factors that could affect Captaris’ actual results include, among others, the impact, if any, of stock-based compensation
charges, the potential failure to maintain and expand Captaris’ network of dealers and resellers or to establish and maintain
strategic relationships, inability to integrate recent and future acquisitions, inability to develop new products or product
enhancements on a timely basis, inability to protect our proprietary rights or to operate without infringing the patents and
proprietary rights of others, and quarterly and seasonal fluctuations in operating results. More information about factors
that potentially could affect Captaris’ financial results is included in Captaris’ quarterly reports on Form 10-Q filed in
2006 and most recent annual report on Form 10-K filed with the Securities and Exchange Commission. Readers are cautioned not
to place undue reliance upon these forward-looking statements that speak only as to the date of this release. Except as required
by law, Captaris undertakes no obligation to update any forward-looking or other statements in this press release, whether
as a result of new information, future events or otherwise.
The following are registered trademarks and trademarks of Captaris: Captaris, Alchemy, RightFax, Captaris Document Management,
Captaris Interchange and Captaris Workflow. All other brand names and trademarks are the property of their respective owners.
| Captaris, Inc. |
|
|
|
|
| Condensed Consolidated Balance Sheets |
|
|
|
|
| (in thousands) |
|
|
|
|
| (Unaudited) |
|
|
|
|
| |
|
|
September 30, |
|
December 31, |
| |
|
|
2006 |
|
2005 |
| Assets |
|
|
|
|
| Current assets: |
|
|
|
|
| Cash and cash equivalents |
|
$ 8,578 |
|
$ 6,420 |
| Short-term investments, available-for-sale |
|
13,191 |
|
17,506 |
| Accounts receivable, net |
|
15,920 |
|
18,776 |
| Inventories |
|
796 |
|
534 |
| Prepaid expenses and other |
|
2,724 |
|
1,759 |
| Deferred tax assets and income tax receivable |
|
2,229 |
|
4,141 |
| |
Total current assets |
|
43,438 |
|
49,136 |
| |
|
|
|
|
|
| Long-term investments, available-for-sale |
|
35,108 |
|
27,601 |
| Restricted cash |
|
1,000 |
|
1,000 |
| Long-term assets |
|
297 |
|
337 |
| Equipment and leasehold improvements, net |
|
4,308 |
|
6,200 |
| Intangible assets, net |
|
7,263 |
|
9,767 |
| Goodwill |
|
|
32,741 |
|
32,313 |
| Deferred tax assets, net |
|
4,366 |
|
4,849 |
| |
Total assets |
|
$ 128,521 |
|
$ 131,203 |
| |
|
|
|
|
|
| |
|
|
|
|
|
| Liabilities and Shareholders' Equity |
|
|
|
|
| Current liabilities: |
|
|
|
|
| Accounts payable |
|
$ 3,896 |
|
$ 4,665 |
| Accrued compensation and benefits |
|
3,829 |
|
3,764 |
| Other accrued liabilities |
|
1,966 |
|
2,390 |
| Income taxes payable |
|
165 |
|
80 |
| Deferred revenue |
|
19,003 |
|
18,104 |
| |
Total current liabilities |
|
28,859 |
|
29,003 |
| |
|
|
|
|
|
| |
|
|
|
|
|
| Accrued liabilities - noncurrent |
|
315 |
|
317 |
| Deferred revenue - noncurrent |
|
4,791 |
|
4,104 |
| |
Total Liabilities |
|
33,965 |
|
33,424 |
| |
|
|
|
|
|
| Shareholders' equity: |
|
|
|
|
| Common stock |
|
272 |
|
284 |
| Additional paid-in capital |
|
45,090 |
|
50,835 |
| Retained earnings |
47,545 |
|
45,809 |
| Accumulated other comprehensive income |
|
1,649 |
|
851 |
| |
Total shareholders' equity |
|
94,556 |
|
97,779 |
| |
|
|
|
|
|
| |
Total liabilities and shareholders' equity |
|
$ 128,521 |
|
$ 131,203 |
| Captaris, Inc. |
|
|
|
|
|
|
|
| Condensed Consolidated Statements of Operations |
|
|
|
|
|
|
|
| (in thousands, except per share data) |
|
|
|
|
|
|
|
| (Unaudited) |
|
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
|
|
|
|
|
|
| Net revenue: |
|
|
|
|
|
|
|
| Software revenue |
$ 9,647 |
|
$ 8,331 |
|
$ 25,164 |
|
$ 23,169 |
| Maintenance, support and services revenue |
9,385 |
|
8,192 |
|
26,693 |
|
23,408 |
| Hardware revenue |
5,528 |
|
5,232 |
|
14,906 |
|
15,140 |
| Net revenue |
24,560 |
|
21,755 |
|
66,763 |
|
61,717 |
|
|
|
|
|
|
|
|
| Cost of revenue |
7,441 |
|
6,608 |
|
19,855 |
|
19,650 |
|
|
|
|
|
|
|
|
| Gross profit |
17,119 |
|
15,147 |
|
46,908 |
|
42,067 |
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
| Research and development |
3,029 |
|
3,476 |
|
9,387 |
|
10,228 |
| Selling and marketing |
7,806 |
|
8,830 |
|
23,779 |
|
25,206 |
| General and administrative |
3,929 |
|
4,623 |
|
12,139 |
|
14,091 |
| Amortization of intangible assets |
354 |
|
454 |
|
1,062 |
|
1,362 |
| Gain on sale of discontinued product line CallXpress |
- |
|
- |
|
(1,000) |
|
(1,000) |
|
|
|
|
|
|
|
|
| Total operating expenses |
15,118 |
|
17,383 |
|
45,367 |
|
49,887 |
|
|
|
|
|
|
|
|
| Operating income (loss) |
2,001 |
|
(2,236) |
|
1,541 |
|
(7,820) |
|
|
|
|
|
|
|
|
| Other income (expense): |
|
|
|
|
|
|
|
| Interest |
481 |
|
281 |
|
1,394 |
|
835 |
| Other, net |
(146) |
|
(82) |
|
(237) |
|
(210) |
| Other income, net |
335 |
|
199 |
|
1,157 |
|
625 |
|
|
|
|
|
|
|
|
| Income (loss) from continuing operations before income tax expense (benefit) |
2,336 |
|
(2,037) |
|
2,698 |
|
(7,195) |
| Income tax expense (benefit) |
693 |
|
(1,343) |
|
989 |
|
(3,137) |
|
|
|
|
|
|
|
|
| Income (loss) from continuing operations |
1,643 |
|
(694) |
|
1,709 |
|
(4,058) |
|
|
|
|
|
|
|
|
| Discontinued operations: |
|
|
|
|
|
|
|
| Gain(loss) from sale of MediaTel assets, net of income tax expense (benefit) |
(16) |
|
5 |
|
27 |
|
35 |
| Income (loss) from discontinued operations |
(16) |
|
5 |
|
27 |
|
35 |
|
|
|
|
|
|
|
|
| Net income (loss) |
$ 1,627 |
|
$ (689) |
|
$ 1,736 |
|
$ (4,023) |
|
|
|
|
|
|
|
|
| Basic net income (loss) per common share: |
|
|
|
|
|
|
|
| Income (loss) from continuing operations |
$ 0.06 |
|
$ (0.02) |
|
$ 0.06 |
|
$ (0.14) |
| Income(loss) from discontinued operations |
(0.00) |
|
0.00 |
|
0.00 |
|
0.00 |
| Net income (loss) |
$ 0.06 |
|
$ (0.02) |
|
$ 0.06 |
|
$ (0.14) |
|
|
|
|
|
|
|
|
| Diluted net income (loss) per common share: |
|
|
|
|
|
|
|
| Income (loss) from continuing operations |
$ 0.06 |
|
$ (0.02) |
|
$ 0.06 |
|
$ (0.14) |
| Income(loss) from discontinued operations |
(0.00) |
|
0.00 |
|
0.00 |
|
0.00 |
| Net income (loss) |
$ 0.06 |
|
$ (0.02) |
|
$ 0.06 |
|
$ (0.14) |
|
|
|
|
|
|
|
|
| Weighted average basic common shares |
27,859 |
|
29,056 |
|
28,131 |
|
29,077 |
| Weighted average diluted common shares |
28,472 |
|
29,056 |
|
28,617 |
|
29,077 |
| Captaris, Inc. |
|
|
|
| Condensed Consolidated Statements of Cash Flows |
|
|
|
| (in thousands) |
|
|
|
| (Unaudited) |
|
|
|
|
Nine Months Ended |
|
September 30, |
|
2006 |
|
2005 |
|
|
|
|
| Cash flows from operating activities: |
|
|
|
| Net income (loss) |
$ 1,736 |
|
$ (4,023) |
| Adjustments to reconcile net income (loss) to net cash provided |
|
|
|
| by operating activities: |
|
|
|
| Depreciation |
2,407 |
|
2,607 |
| Amortization |
2,505 |
|
2,806 |
| Stock-based compensation expense (benefit) |
476 |
|
(239) |
| Provision for doubtful accounts |
113 |
|
438 |
| Loss (Gain) on disposition of equipment |
55 |
|
(19) |
| Changes in assets and liabilities: |
|
|
|
| Accounts receivables, net |
3,046 |
|
1,238 |
| Inventories |
(187) |
|
245 |
| Prepaid expenses and other assets |
(916) |
|
(551) |
| Deferred income tax assets, net and taxes receivable |
3,070 |
|
(2,693) |
| Accounts payable |
(802) |
|
(2,211) |
| Accrued compensation and benefits |
70 |
|
(194) |
| Other accrued liabilities |
(466) |
|
673 |
| Income taxes payable |
(647) |
|
(23) |
| Deferred revenue |
1,586 |
|
1,772 |
| Net cash flow provided by (used in) operating activities |
12,046 |
|
(174) |
|
|
|
|
| Cash flows from investing activities: |
|
|
|
| Purchase of equipment and leasehold improvements |
(530) |
|
(2,646) |
| Purchase of investments |
(51,965) |
|
(44,002) |
| Purchase of businesses, net of cash acquired |
- |
|
2 |
| Proceeds from disposals of fixed assets |
7 |
|
25 |
| Proceeds from sales and maturities of investments |
48,878 |
|
48,446 |
| Net cash provided by (used in) investing activities |
(3,610) |
|
1,825 |
|
|
|
|
| Cash from financing activities: |
|
|
|
| Proceeds from exercises of stock options |
1,250 |
|
362 |
| Repurchase of common stock |
(7,754) |
|
(4,442) |
| Excess tax benefits from stock-based compensation |
271 |
|
- |
| Net cash used in financing activities |
(6,233) |
|
(4,080) |
|
|
|
|
| Net increase (decrease) in cash |
2,203 |
|
(2,429) |
|
|
|
|
| Effect of exchange rate changes on cash |
(45) |
|
20 |
|
|
|
|
| Cash and cash equivalents at beginning of period |
6,420 |
|
7,563 |
|
|
|
|
| Cash and cash equivalents at end of period |
$ 8,578 |
|
$ 5,154 |
|
|
|
|
| Cash paid during the period for income taxes |
$ 129 |
|
$ 335 |
| Captaris, Inc. |
|
|
|
| Additional Information |
|
|
|
| (in thousands) |
|
|
|
| (Unaudited) |
|
|
|
